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1. Your family invested in perpetuity (by paying a lump-sum) 50 years ago.The perpetuity pays $120,000 per year for infinity. What would be the current fair price for this perpetuity (that you can sell it for, if you wish), if the current interest rate is 4% with annual compounding?
PERPETUITY
Current Interest:	4%	Time of payment:	1	2	3	4	5	6	7		to infinity		FORMULA:
Fair Value:	?	Receive (Income):											?
2. How would your answer change for the previous question if it was not a perpetuity, but an annuity, with 15 more years of reccuring annual payments and the initial lump-sum payment amount of $2,000,000, which will be returned at the end?
(Hint: the initial payment will be repaid at the end of 15 years)
ANNUITY
		Time of payment:	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15
Current Interest:	4%	Receive (Income):
Discount Factor:
PV of Cash Flows:
TOTAL PV:	$ -

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